R2I - What to do with the 401(k) account?

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Have you decided to Return to India (R2I)? Wondering what to do with your 401(k) account? Handling your 401(k) account is one of the big things in R2I checklist. This blog post explains the different things you can do with your 401(k) account, during your R2I. (Also read: R2I Planning Guide)

When you quit job during your return to India, your 401(k) account will move to 'terminated status'. On your last day of employment, you'll be given a 'participant distribution' form. You'll have to decide what you want to do with your 401(k) account.

You'll have the following options:

1) You can still maintain your 401(k) account without making any contributions to it. You'll be allowed to manage the funds. You can wait till your retirement to close your 401(k) account. You'll need to pay taxes only when you close the account (i.e., after your retirement). Many 401k providers allow you to manage the account online. So, you don't have to be worried about remotely managing the account from India.

2) You can close your 401(k) account. In which case, there is a 20% federal tax + 10% penalty for early withdrawal. You'll have to settle the remaining taxes (based on your income bracket), when you file your taxes next year.

3) You can rollover the funds to an IRA account. No tax will be deducted when you rollover the funds to an IRA account. However, when you close the IRA account in the future, you'll be taxed.

4) You can rollover the funds to a Roth IRA account. Tax will be deducted when you rollover the funds to a Roth IRA account. However, when you close the Roth IRA in the future, you won't be taxed.

Filling the 'participant distribution' form is a must on your last day of employment or a few days after that.

You should talk to a financial adviser for greater insights.

Note:

• You'll be in Resident but not Ordinarily Resident (RNOR) status for the first two years after your R2I. Subsequently, you'll have to pay taxes in India, for the money that you are bringing from USA. Yes, you'll be taxed twice.

• Some people will close their 401(k) after they R2I. They'll withdraw funds in small amounts so that they'll fall under the 'minimum' tax bracket. That way, they'll have to pay very less tax to the US government. However, after 2 years, you'll have to pay taxes in India too (since you won't be in the RNOR period)

Related posts:

Return to India (R2I) - 25 things to do
R2I - 401(k) closure FAQs
How can I get my Social Security benefits/money?

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Return to India (R2I) Salary Negotiation Tips

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How do you know the best salary that you can get when you R2I? Does the R2I salary look like a dark black box to you? Yes! You need to do a lot of homework before you go to the negotiation table. The following information will give you enough ammunition to negotiate your R2I salary :

1) Check with your friends in India who have more or less the same experience like yours. Having worked in USA for sometime, you should've gained more experience and exposure. So, you should be definitely paid 10 - 20% more than your friend who has been working in India, all these days.

2) Your salary should be approximately 1/3rd of what you are earning today in US (include your total compensation such as stocks, bonus etc.,)

3) The salary range significantly varies across companies - service companies vs product companies, established companies vs startups, local companies vs multinationals. The formers pay less, while the latter pay more.

4) There is a significant difference in the salary based on the city/state in which you'll be working. For example, in Bangalore you may get 20 - 30% more than what you can get in Chennai.

5) The salary will also vary depending on whether you find your job from US or after landing in India. When you look for a job in India from US, you'll be among the very few who is trying to move back to India. But, when you look for a job in India after reaching India, you'll be among several thousands who are hunting for jobs. You may not get a special treatment, there.

6) Check for prevailing salaries in India from web sites such as www.glassdoor.com, www.payscale.com etc., However, these sources are less reliable when compared to the actual numbers you may hear from your friends/acquaintances.

7) Your salary is decided by how well you perform in the interviews & how much value you can bring-in to the company. You can negotiate your salary based on your performance during the interviews.

8) At times, companies will be very eager to fill a position with a specialist. If you are a specialist, then you have an upper hand in the salary negotiation.

9) If you are interviewing with companies who are based in US, your chances of getting a good pay is high. So, approach US companies who are trying to fill a position in their India office.

10) India's salary structure is slightly different that of US salary structure. In India, they'll call it as CTC (Cost to Company). It includes the pay, bonus + all the benefits that you receive from the company. You'll have a Basic Pay (which is completely taxable) and there are other allowances such as House Rent Allowance (HRA), Travel allowance (TA) etc., (the allowances are non-taxable, if you produce bills. There is a cap on the amount up to which you can produce bills). All Indian IT companies offer medical insurance these days (will be very useful if you have elderly persons or kids in your family). Some companies give you Sodexho passes (you can use them to buy groceries, to dine out, for shopping etc.,). All companies have a annual bonus component (typically, added to the salary. So, check with your employer before you sign the offer letter). Some companies will also take care of your relocation costs. That will be a sweet deal. There are very few companies that give stock options to employees.

Hopefully, these 10 tips give you enough data points to negotiate your salary. Wishing you good luck !

Related Posts:

Cost to Company (CTC) - Peeling the Onion
10 things to know if you are thinking of Returning to India (R2I)
Work environment in India - Then & Now

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Driving on Indian roads - Pleasure or Pain?

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I postponed my decision to buy a car until I get some good road sense and gain some experience on the Indian roads. I bought my Honda Aviator, 3 weeks ago. This is the third vehicle that I'm owning. My first vehicle was the bicycle that I got during my high school days. Second vehicle was the Honda Accord, that I owned during my stay in US.

Also read: Shared van/shuttle services in Chennai - hard to find!?

Honda Aviator is very cool. It is stylish, has more leg space and is well suited for tall guys like me. It is also good at shock absorption (apt for Indian roads). I'm obsessed about dark/bright colors and I chose a red colored vehicle. I decided to buy the Honda Aviator model for 3 reasons - I don't have experience driving geared vehicles, I needed more leg space and there was a 2 months wait time to buy a Honda Activa (cannot wait that long!).

I bought this scooter as if I was buying a soap bar at a grocery store. I went to the shop, looked at the scooter and wrote a cheque. My benign attempt to negotiate the price proved to be futile. Well, all the skills that I picked-up during my masters & in sales training faltered. My urge to buy the scooter was higher than the dealer's urge to sell.

Also read: Self-adjusting traffic - a miracle on Indian Roads

I don't have prior driving experience on Indian roads. So, I've been learning quite a few interesting lessons about driving on Indian roads. You can see them below:

1. You cannot avoid an accident if YOU alone drive carefully.. others also should
2. People don't treat traffic signs/signals as RULES. They are treated as GUIDELINES
3. Don't tail gate autos/cars. They may avoid a pit/bump on the road & you cannot
4. Crossing or taking turns during the first few minutes of a signal change or during the last few minutes of the signal change may be dangerous
5. Survival of the fittest holds good (You need to master the art of driving through even inches of gap between vehicles)
6. You cannot avoid honking or getting honked
7. At times, pedestrians have right of way & at times they don't (It actually depends on the driver)
8. Your indicator light signals are typically ignored (When you turn-on a "right-side" indicator, the person coming behind on your right will not slow down or give you way)
9. Expect vehicles from the opposite direction in one-way roads
10. There is no real speed limit in any of the roads. Use your intuition

Driving on Indian roads is definitely not a pleasure. I'll continue to update this list as and when I learn new things :)


Also read:


Got the two-wheeler driving license - after hours of waiting
Two wheeler service - Can't escape from those long lines and hours of waiting
Heavy Rain made Chennai into Venice

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When is the right time to go to US?

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Are you one of those folks who dream about going to US, but haven't taken any action towards it? Are you waiting for the 'perfect' time to go to US? Have you been procrastinating your move to US? Are you not sure about when to go to US? I have seen people walking into this dream land during different stages of life. I'll share my perceptions here & hopefully, it helps you in making a decision.  (Also read: Green Card vs. US Citizenship)

Right after your college education - Many folks go to US to do their higher studies. Leading a student life is a bit difficult - not much money at hand; have to maintain multiple credit cards to payoff bills; have to work somewhere in addition to studies etc., But, you'll learn lots of interesting life lessons during this period. Depending upon the university you join, you'll also get good academic knowledge. You can also develop a network of friends during your school. Only thing you'll miss is "luxury", unless your parents have piles of cash under their mattress. You'll complete your higher studies in 2 or 3 years. After that, when you get into a full-time job, your quality of life will improve tremendously. (Note: I haven't seen someone going to US to "work", right after their college. You'll need some work experience in India before going to US to work)

When you are a bachelor - This is the time when you can take more risks. You have everything in the world to GAIN but very little to lose. It will be more fun when you have lots of friends in US (especially, in the same locality where you live). You can do a variety of things with your friends - regular get togethers, lots of driving, visiting new/interesting places, hiking/sports, hangouts during nights, etc., Also, you'll have lots of time to work - you can go above and beyond what is expected out of you at work. This period will help you to 'establish' yourself at work. Even if you don't have a stable or high-paying job, you can take the hit during your bachelor days. Your cost of living will also be very low (because of shared accommodation/expenses). You'll be able to save a lot of money during this period.

Right after your wedding - Spending the first few years of post-marriage life in US is exciting. Your spouse would enjoy getting your total attention (i.e., you won't be disturbed by family/relatives etc.,). You can also visit a lot of places. You may have some challenge with respect to achieving work-life balance. If your spouse cannot work in US & if you are spending more hours at work, your spouse may feel lonely. Some spouses may enjoy loneliness and others may not. I have seen a case where it ended up in divorce, right after a year. If you don't have a stable job or don't have good pay - you may have to lead a conservative life (i.e., you cannot buy a lot of things for your home, you may not be having a car, you cannot dine out frequently etc.,) The single biggest expense during this period will be your house rent. Other expenses are somewhat manageable. If you have a stable job & good pay, you can lead a luxurious life.

After your kid - Going to US during this stage of life will be challenging. You need to have lots of patience & tolerance. You should be able to adapt quickly to the changes/challenges. If you have a stable job & good pay, you can lead a decent life. However, job stability in US is always a big question mark - especially during the first few years of your career in US. Moreover, your starting salary would be typically less. If your kid is too small & if your spouse is also not working, you'll feel the pinch. You may not be able to do justification to your work as well as your family (i.e., establishing work-life balance would be difficult). During the initial days, if the kid gets sick, you may have to depend on someone to take you to hospital & you may need help from your friends to do even shopping. You have to lead a conservative life because the expenses will sky rocket (house rent, groceries, medical bills, commute/travel costs, kids' toys, etc.,). When the kid is above 2 years, you need to put him/her in pre-school. For a kid to go to a day care or a pre-school, you need to pay atleast $500/$600 per month. After 4 years, if you cannot put your kid in public school, you need to pay atleast $1000 per month as private school fees. You have to sit tight on expenses. If your objective is to earn money in US, you may not be able to achieve your goal quickly (especially, if there is only single income).

In Tamil, there is a saying "Thirai kadal oadiyum thiraviyam theadu" which means "Sail across ocean to find wealth". Going to US gives you lots of exposure & can also make you rich. Unless, you have family reasons that force you to stay in India, I would highly recommend you to go to US and work for a few years (especially, if you are in the IT field).

Related posts:

Going to US through a consultant on a H1B Visa?
Stages of Immigrant Life in USA
Green Card vs. US Citizenship

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